The report shows digital technologies can transform the way companies carry out their business, but there is still a reluctance to use what is available.
Findings show that while more than three quarters of retailers have embraced e-business technologies, over half of small retail firms have yet to change.
Stephen Timms, minister of e-commerce, said: 'The UK's retailers are making progress in adopting e-commerce and developing e-business solutions. But there clearly is room for improvement.
'E-business technologies offer a wealth of benefits. In order to exploit these we must create the right culture throughout the business community so that UK firms of all sizes can seize the competitive advantage.'
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